Solar Capital (NASDAQ: SLRC) and Fidus Investment Corporation (NASDAQ:FDUS) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, valuation, risk, earnings, profitability, institutional ownership and analyst recommendations.

Analyst Ratings

This is a summary of current ratings for Solar Capital and Fidus Investment Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Solar Capital 0 3 2 0 2.40
Fidus Investment Corporation 0 2 1 0 2.33

Solar Capital presently has a consensus target price of $23.10, suggesting a potential upside of 7.14%. Fidus Investment Corporation has a consensus target price of $17.50, suggesting a potential upside of 5.93%. Given Solar Capital’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Solar Capital is more favorable than Fidus Investment Corporation.

Profitability

This table compares Solar Capital and Fidus Investment Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Solar Capital 54.87% 7.30% 3.96%
Fidus Investment Corporation 62.46% 9.08% 5.56%

Dividends

Solar Capital pays an annual dividend of $1.60 per share and has a dividend yield of 7.4%. Fidus Investment Corporation pays an annual dividend of $1.56 per share and has a dividend yield of 9.4%. Solar Capital pays out 85.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Fidus Investment Corporation pays out 80.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Fidus Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Solar Capital and Fidus Investment Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Solar Capital N/A N/A N/A $1.88 11.47
Fidus Investment Corporation N/A N/A N/A $1.93 8.56

Fidus Investment Corporation is trading at a lower price-to-earnings ratio than Solar Capital, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

62.7% of Solar Capital shares are owned by institutional investors. Comparatively, 30.7% of Fidus Investment Corporation shares are owned by institutional investors. 5.9% of Solar Capital shares are owned by company insiders. Comparatively, 1.3% of Fidus Investment Corporation shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Solar Capital has a beta of 0.55, meaning that its share price is 45% less volatile than the S&P 500. Comparatively, Fidus Investment Corporation has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500.

Summary

Fidus Investment Corporation beats Solar Capital on 7 of the 12 factors compared between the two stocks.

Solar Capital Company Profile

Solar Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests in privately held the United States middle market companies. It invests in leveraged middle market companies in the form of senior secured loans, unitranche loans, mezzanine loans and equity securities. It may also invest in public companies that are thinly traded. Its business is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Its investments generally range between $5 million and $100 million each. In addition, the Company may invest a portion of its portfolio in other types of investments, which it refers to as opportunistic investments. The Company’s investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).

Fidus Investment Corporation Company Profile

Fidus Investment Corporation is a closed-end, non-diversified investment company. The Company provides customized debt and equity financing solutions to lower middle-market companies. The Company’s investment objective is to provide attractive risk-adjusted returns by generating both current income from its debt investments and capital appreciation from its equity-related investments. The Company typically invests in mezzanine debt, which includes senior subordinated notes and junior secured loans. The Company structures some of its debt investments as senior secured or unitranche loans. The Company’s equity securities typically consist of either a direct minority equity investment in common or preferred stock or membership/partnership interests of a portfolio company, or it may receive warrants to buy a minority equity interest in a portfolio company in connection with a debt investment. Its investment activities are managed by Fidus Investment Advisors, LLC, its investment advisor.

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